Gold

Among the many amazing things the gods of irony and absurdity have showered upon us in the last decade or so, I have to score serious discussion of a gold standard for money very high. Many years ago an economist friend explained that Marx’s labor theory of value was correct, but trivially correct, because there could just as well be a chocolate theory of value or a widget theory of value.  Or a gold theory of value, and indeed there is: everything in the world has a value in gold that you can easily calculate from the ratio of the money prices of gold and that thing at the moment. Also a value in tons of scrap paper for delivery on the dock in Long Beach on Oct. 23, or hours of labor by X at task Y. A gold standard for a society much larger than you and two or three friends is the kind of thing that can only be proposed by someone who thinks economics is about money, or that money is what makes stuff worth having. Or that the mechanism of operation of sleeping pills is that they have the dormative virtue.

Gold has some advantages over stuff like waste paper as a conventional medium of exchange. It’s practically inert, so it doesn’t decay, evaporate, or corrode and with a tidge of alloying metals, can be made hard enough to withstand abrasion and wear. It’s ductile and easy to forge into convenient shapes with good detail retention, and reasonably easy to assay for purity and genuineness. It’s pretty to look at and stays shiny.

It’s also scarce: all the gold that has ever been mined would fit in a cube about 65 feet on a side, and would weigh about as much as a couple of nice aircraft carriers. Fortunately, for practical uses like dental crowns, electrical contact plating, and the like, a little goes a long way because nearly all of these applications have to do with surface properties and not mass, and it’s easy to spread, plate, and draw very thin. So, handy stuff, scarce, pretty: hooray for gold.

The idea of denominating business claims and obligations in ounces of gold, however, is deeply bizarre. Suppose you lent someone an ounce of gold, repaid at 5% interest next year as 1.05 oz (of course this would all be managed by entries in computer accounts, or at least paper gold certificates), and a mining company made a big find, or someone figured out how to get it out of sea water (where a fair amount is very thinly dispersed) cheap. Or floods trash the Indian economy, and a bunch of the very big pile of gold held by women there as jewelry gets spent for food and clothing. Your debt would be repaid with something with which you can get a whole lot less of what you really want (lunch, movie tickets, gas for your car, etc.), and vice versa, than when you made the deal. Ow! You and all the other creditors in the world are sad; debtors are glad. And this massive transfer of wealth is good for the world how? You may or may not favor some inflation, but I’ve never met anyone who thinks the fortunes of a specialized corner of the mining industry, or the Indian domestic economy, is an excellent thing to peg it to.

As you can imagine, a couple of episodes like this and the government will be actively scarfing up gold, or selling it for something like coal or land, to stabilize prices, and the current gold bugs will be the first in line to demand it do so. We’ll be executing a monetary policy not importantly different, but a lot less convenient, than the one we have now.

Gold has intrinsic value, just like everything else in the world, but its value is no more intrinsic that all the other stuff; just like hog bellies for next June, or federal reserve notes, it’s worth what everyone in the world decides it’s worth after they make all the possible deals that look good to both sides. And it will be that way whether or not a government is loony enough to declare it legal tender by the ounce.

Next hare-brained scheme, please.

Author: Michael O'Hare

Professor of Public Policy at the Goldman School of Public Policy, University of California, Berkeley, Michael O'Hare was raised in New York City and trained at Harvard as an architect and structural engineer. Diverted from an honest career designing buildings by the offer of a job in which he could think about anything he wanted to and spend his time with very smart and curious young people, he fell among economists and such like, and continues to benefit from their generosity with on-the-job social science training. He has followed the process and principles of design into "nonphysical environments" such as production processes in organizations, regulation, and information management and published a variety of research in environmental policy, government policy towards the arts, and management, with special interests in energy, facility siting, information and perceptions in public choice and work environments, and policy design. His current research is focused on transportation biofuels and their effects on global land use, food security, and international trade; regulatory policy in the face of scientific uncertainty; and, after a three-decade hiatus, on NIMBY conflicts afflicting high speed rail right-of-way and nuclear waste disposal sites. He is also a regular writer on pedagogy, especially teaching in professional education, and co-edited the "Curriculum and Case Notes" section of the Journal of Policy Analysis and Management. Between faculty appointments at the MIT Department of Urban Studies and Planning and the John F. Kennedy School of Government at Harvard, he was director of policy analysis at the Massachusetts Executive Office of Environmental Affairs. He has had visiting appointments at Università Bocconi in Milan and the National University of Singapore and teaches regularly in the Goldman School's executive (mid-career) programs. At GSPP, O'Hare has taught a studio course in Program and Policy Design, Arts and Cultural Policy, Public Management, the pedagogy course for graduate student instructors, Quantitative Methods, Environmental Policy, and the introduction to public policy for its undergraduate minor, which he supervises. Generally, he considers himself the school's resident expert in any subject in which there is no such thing as real expertise (a recent project concerned the governance and design of California county fairs), but is secure in the distinction of being the only faculty member with a metal lathe in his basement and a 4×5 Ebony view camera. At the moment, he would rather be making something with his hands than writing this blurb.

33 thoughts on “Gold”

  1. *Virtus dormitiva* explanations get a bad rap. If the question is “why did he go to sleep after taking the opium?”, “Opium has the power to put people to sleep” is a perfectly good response. Such an explanation says that there is a causal power in the opium–his going to sleep was not an accident. That answer to that question is just fine. Whether or not such explanations are good depends, I think, on details about the question being asked.

  2. Winston, in the classic example, the question being asked is “Why does opium make people sleepy?” in which case, “because opium has sleep-inducing properties” is not useful.

  3. My favorite absurdity about the goldbugs’ thinking is one highlighted by Yglesias today: by taking the power to set the value of the dollar out of the world markets and placing it in the hands of the Mint (and whoever controls them), it would actually make political meddling in the value of the dollar easier, not harder. (Also, as Yglesias notes, right now if you’re a goldbug you’re free to put your faith in gold – but in a goldbug-run world, how do you take your faith out of gold?). After all, if you’ve got a piece of paper that states it’s worth one dollar’s worth of gold, there’s nothing stopping the Congress or whoever from rejiggering that rate at will.
    Unless, of course, we go to a purely gold transaction economy: none of this arbitrarily valued paper money, all transactions to be handled in actual gold. Imagine: instead of a nickel, you’ve got a milligram of gold. Want to buy a happy meal? No problem – go to the drive-through and weigh out 100 milligrams of gold. Just don’t sneeze.

  4. I also believe that gold buggery is a perversion, but I think that O’Hare is oversimplifying.

    In no reasonably advanced economy is gold money, especially the nineteenth-century economies on the gold standard. Their money was the same as ours: promises by banks. Our modern banks’ promises are denominated in a unit of account that refers only to itself; the gold standard unit of account referred to a right to conversion. Sensible people did not exercise this right, however, because bank money is a damn sight more convenient than sacks of doubloons.

    O’Hare goes off the rails when he attributes the instability of the gold standard to supply shocks. There was (IIRC) only one major supply shock in the history of the gold standard: the cyanide process of the late 19th century. It led to a reasonably controlled inflation, which Milton Friedman approved of. The problem with the gold standard is much more technical and at least twofold. (I’m a banker, not an economist, so I might be missing something.) First, inflation and boom-bust cycles can occur even with a stable (growth in the) amount of gold, because the velocity of bank money–and thus its effective supply–had little to do with the amount of gold in the vaults. (Remember, the gold is typically not acting like a medium of exchange; it is a mere unit of account and store of value.) Gold-standard central banks could and did exercise monetary policy. Bagehot discusses this, although I don’t think he uses the term.

    Second, whenever there was a financial panic, people ran from bank money into the metallic stuff, explosively collapsing the money supply. Yuck.

    Conservatives think that they like the gold standard because they confuse it with the utterly unworkable use of gold as the main medium of exchange. This allows them to think that gold sets the price level, taking monetary policy out of the hands of the pointy-headed Kenyan Jew socialists who are invariably associated with gummint. If they knew what the gold standard was just as managed as Comrade Bernanke’s Soviet-by-the-Potomac, they might think differently. Or maybe not. Their lust of some conservatives to limit the role of government is impervious to logic.

  5. ES, I think a lot of people who advocate a gold standard think of it the way I describe it: that gold is money, or that money value is defined as a quantity of gold (not “one dollar’s worth of gold”. And they don’t make much distinction between currency and money.

  6. I question the assertion that everything has “intrinsic” value. I don’t believe anything has value apart from the desire living beings may show for it. Furthermore since different beings value the same thing in different ways how can it be said that the value is “intrinsic” to any object?

    In fact that’s, I think, the difficulty in using money to measure value. We can measure a solid like, say, a length of wood, and when we measure it tomorrow it will be nearly enough the exact length it was today. So we can define an “inch” and it will always, near enough, measure the same thing in normal experience.

    But a bar of gold will change it’s value from day to day, and from being to being. A dog will perhaps sniff at it and be on it’s way. One person may be willing to exchange money for it, another to kill for it, and another to die for it. The gold itself knows nothing about this and merely is what it is. Intrinsic value is thus a delusion, and economists who think it exists just get themselves into an unnecessary muddle.

    As physicists have learned recently, and as Buddhists have known for longer, nothing has any intrinsic self existence, let alone intrinsic “value”.

    Abstraction is a very useful skill of the human mind, but we get into trouble when we confuse abstractions with intrinsically existing objects, and we need to understand that our abstractions are not intrinsically existing “things”.

    A blog that advertises itself as being based on “reality” should know this.

  7. One other thing that amazes me about the goldbugs: the price of gold has roughly quadrupled in the last five years, measured in dollars. But it’s about the only price that has done so (well, there’s also silver). It’s worth noting that if those prices were a meaningful reflection of gold’s intrinsic value, then a gold-pegged currency would have undergone catastrophic levels of deflation, essentially killing all economic activity. After all, why would anyone ever invest in production when their “money” can quadruple in five years just by staying in the vault? If anyone thinks the recent gains in the price of gold make gold-pegged currency a sensible idea, I’d love to pitch them a great bargain involving a bridge.

  8. Hey Warren, the “value” of gold has not change much in the past 100 years, meaning an ounce of gold will buy pretty much the same thing as it would 90 years ago. A suit, an automobile, a house…what has changed, especially recently is the “value” of the US dollar. The price of gold has made a nice run up, but more importantly the dollars worth is dropping.

    As for Michael’s piece above, perhaps tomorrow you can write another one where space aliens visit earth and drop off tons of gold as a waste product from their ship, or how about is some smart Indian chemist finds a way to turn curry into gold, wow, both of those would really upset the government’s gold based currency. Any other far fetched ideas on what could happen when water can turn to wine?

    The amount of gold that is pulled from the ground has remained very stable over the last century, even with hi tech advances. It remains stable at about 3-4% each year. That’s what makes it such as good currency.

    One question for you and a rather obvious one, people like the gold standard because????? and the answer is: It restricts what Washington can spend 🙂 So let me ask you, what’s your plan instead of gold to stop the reckless growth in debt and the spending happening each day in DC? Besides commodity money, what would stop it?

    Please also remember that fiat currency, paper money backed by nothing, has been in use for about 3000 years. ALL of the past fiat currencies, all of them around the world throughout time…without exception, have become worthless in a within a few decades. All of them without exception and the list is really long. So tell me, why is the US dollar any different? Anytime the government has the ability to print and spend without restraint, they abuse it without exception. So hey, you guys here are all so smart, why is the US dollar and this lazy gov any different and what will they do to reverse the debt and spending without a commodity money? What can they do that would mimic some version of a commodity money and save the day? Because I’m on board with you and that winning model if you can think of one.

  9. the dollars worth is dropping.

    OK, it is your contention that the value of the dollar has dropped by 75% in the last five years? Because if that is your experience, your grocery cart must contain nothing but gold ingots … and I really do need to tell you about this fantastic bridge-based investment opportunity I’ve got for you. You can pay for it in your rapidly devaluing fiat dollars, I don’t mind.

    Hey Warren, the “value” of gold has not change much in the past 100 years, meaning an ounce of gold will buy pretty much the same thing as it would 90 years ago

    As to the price of gold ninety years ago … that’s an awfully arbitrary number, but hey; let’s go with it. According to Wikipedia, in 1919 gold was fixed at about $20 an ounce. I’d shoot for 1921 and exactly 90 years, but this was what I found quickly. According to some random website offering an inflation calculator, the inflation-adjusted value of $20 1919 dollars is about $250 – about 8-fold less than the current price of gold. So either this random website is way off, or you are. Glancing around at other estimates of purchasing power in the 1920s, I’m thinking it might be you.

    Anytime the government has the ability to print and spend without restraint

    Well, no, they don’t. Sure, this might work in a country that didn’t have to trade with anyone, a totally closed society, and a currency that can’t be exchanged for other currency. But while some really quite reprehensible regimes have experimented with such a system (with terrible economic results among the least bad aspects of those societies), that isn’t how things work in the US. Sure, a country with what you like to call fiat currency could go nuts with its printing presses – but it couldn’t get away with it. Because the result would be the massive inflation that you goldbugs persist in imagining is already happening. The result would be economic collapse. In short, in anything short of a totalitarian state paper money just doesn’t work the way your fevered imaginings seem to think it does.

  10. “OK, it is your contention that the value of the dollar has dropped by 75% in the last five years? “

    I’m pretty sure he named a time interval, and it wasn’t five years.

    Look, if you want a stable currency over a period of centuries, (Or even decades!) gold has proven quite effective at that. Fiat currencies have proven to be utter failures at this. With no exception that I’m aware of, they always come to ruin the the long, and we’re not talking really long, term. Average inflation since the US went off the gold standard has been about 3.4%. Doesn’t sound bad, until you realize it means the dollar loses half it’s value every 20 years. In the roughly 100 years since? It’s kept about 5% of it’s original value. That’s right, a 2011 dollar is worth about a 1913 Nickel.

    If you want a guaranteed stable currency over a period of a few years, you’re hosed. NOTHING supplies that.

    So you’re dissing gold over something NOTHING supplies, while ignoring that it does, in fact, have a rather conspicuous utility as a currency basis: Control of long term inflation.

    Of course, the world’s governments did indeed have a reason for going off the gold standard. The biggest advantage of gold for people using a currency, is it’s biggest disadvantage if you’re issuing a currency: It doesn’t help you to inflate your way out of your debts.

    Which is what I fully expect we’re doing to do in the next 20 years. 3.4% per year is just an average. We’re pretty sure to beat it over the next couple of decades. All fiat currencies eventually come to ruin, because the ability to ruin them is the point of fiat currencies, the only question is how fast you do it, and when you finish the job.

    But, anyway, gold was not abandoned as a basis for currency because it was a bad basis for a currency. Rather, it was abandoned because of it’s chief virtue: It’s extremely difficult to deliberately induce an inflation when you’re under a gold standard.

  11. I’m grateful for Mark Herpel’s post. It beautifully bears out the point I made upthread (and Michael O’Hare seconded): the wingnut gold standard may as well be called a pony standard, for all it has to do with the real gold standard of the nineteenth century.

  12. Mark Herpel says:

    “Hey Warren, the “value” of gold has not change much in the past 100 years, meaning an ounce of gold will buy pretty much the same thing as it would 90 years ago. A suit, an automobile, a house…what has changed, especially recently is the “value” of the US dollar. The price of gold has made a nice run up, but more importantly the dollars worth is dropping.”

    The ‘value’ of the US dollar being defined by you as ‘how much gold will it buy’, and not foolish things like ‘how much stuff in general will it buy’.

  13. DonBoy–
    That’s why I was careful to point out that it depends on the exact nature of the question. To my shame, I don’t read Latin, so I’m not sure whether there’s any subtlety in the text. The really important point is that we not use the passage to illicitly support some kind of nominalism, denying that there is a real property in the opium that induces sleep. Though even if the question is “why does taking opium cause one to sleep?”, it’s not as dumb as people make it out to be to say “there’s some real property/characteristic in the opium that does it.” This is consistent with thinking, e.g., that that real aspect could be isolated, and might be common to many such substances. It’s an attenuated type of scientific explanation, but it’s not unmitigated stupidity. None of this is to defend DV explanations in an unqualified way.

  14. Michael,

    You and Yglesias don’t get it. The goldbugs are out there because they WANT deflation. Seniors, who are relying on savings, would be net beneficiaries of a gold standard induced deflation. So would the top 1% of asset holders in America. These folks don’t care that deflation would wipe out the American middle class, and reduce America’s poor to third world levels.

  15. and not foolish things like ‘how much stuff in general will it buy’.

    I’m not sure on that. I seem to recall being able to buy gas in the late 1990’s for about $1 a gallon, so 200-250 gallons of gas for an ounce of gold. I think that’s certainly closer to the same now than the price of gas in dollars.

  16. The goldbugs here are missing one of O’Hare’s and Yglesias’ main points, namely that anyone who wants to create their own private gold standard is free to do so. For money in the checking account that you’re going to spend reasonably quickly, whether the currency is fiat or commodity backed doesn’t matter unless you’re living in Zimbabwe or Weimar Germany. Inflation is immaterial over the space of a few months. For savings — where you’re really concerned about the devaluation of our fiat dollars by Ben Bernanke — if you think gold is the best store of value, you’re free to buy the stuff with current dollars and redeem it later for what you expect to be many more devalued dollars. Go for it!

  17. Brett,
    I’m sorry to see that you couldn’t be bothered to read to the second paragraph of my reply to Mark Herpel. Because, yes, I did address his cited figure of the last ninety years (well, I chose 92 years for convenience). Over that interval, inflation has seen the value of the dollar decline by about an order of magnitude – and the value of gold, measured in dollars, increase by about two orders of magnitude. For those of you playing at home, this means a quite negligible and perhaps even salutary inflation rate for “fiat money”, year on year (you want money to retain the vast majority of its value, but it doesn’t hurt to disincentivize storing it in a mattress), but a rather dangerous deflation rate for gold over the same period, were gold to be the currency. Potentially catastrophic deflation isn’t really a good prescription for the “control of long term inflation” you seek. Of course, as Benny Lava noted, it does have it’s advantages for some people – though not, I believe, for people in either your situation or mine.

    As to your claim that the purpose of inflation is to permit countries to inflate their way out of debts, you display a curious lack of faith in the markets for someone of your professed libertarian tendencies. Those debts are incurred when money is borrowed from lenders who are theoretically rational and aware of the potential for inflation. If they fear the specter you conjure, they have other options: not lending it, for one thing, or naming the loan denominated in some other currency or even commodity. Or simply demanding a high rate of return, to counter the effects of inflation and to balance the risk of still greater inflation. As Yglesias says, and as several people have echoed in this thread, if you or any other investor want to adopt the gold standard for your own investments, there’s little stopping you.

  18. It strikes me that tying the value of a unit of currency to a specific amount of gold would not keep governments from ruining it by simply printing more. Such a policy would simply force government to print new currency pegged to a different commodity (e.g., silver, or perhaps rare earth metals necessary for high-tech manufacturing). As long as currency users placed a value on the secondary commodity (they willingly trade gold or dollars for it), and creating more of the secondary commodity is not easy, the currency would spend, albeit perhaps at a different price (that is, a gallon of gas might cost three gold-based dollars but only one silver-based dollar).

  19. Of course I meant a gallon of gas in this scenario might cost one gold dollar but three silver dollars.

    And by the way…what makes the US dollar different, Mr. Herpel, is that the US government prints them, and the US government is a very different animal than the creators of previous “fiat currencies.” Don’t you believe in American Exceptionalism, like all good patriots?

  20. an ounce of gold will buy pretty much the same thing as it would 90 years ago. A suit, an automobile, a house…what has changed, especially recently is the “value” of the US dollar. The price of gold has made a nice run up, but more importantly the dollars worth is dropping.

    So you’re claiming the price of gold in dollar terms has gone up about the same as the price of suits and houses? So? By the way, I read this “price of a suit” business a lot, though ususally covering centuries. It’s typical of the balderdash gold bugs throw around. Is there an index somewhere of suit prices, with quality levels and so on, that can be compared to gold prices over the years?

    Incidentally, it’s not true that there have been hardly any gold supply shocks. The discovery by the Spanish of western hemisphere gold had a large inflationary effect in Spain. Similarly, major discoveries in South Africa near the end of the 19th century more or less alleviated gold standard based problems in the US. And inflations are not the major problem. Gold standards often lead to deflation – if the supply doesn’t grow fast enough to support expansion – and accompanying recessions. It’s certainly arguable that pulling off the gold standard helped countries come out of the Great Depression.

  21. Look, if you want a stable currency over a period of centuries, (Or even decades!) gold has proven quite effective at that. Fiat currencies have proven to be utter failures at this. With no exception that I’m aware of, they always come to ruin the the long, and we’re not talking really long, term. Average inflation since the US went off the gold standard has been about 3.4%. Doesn’t sound bad, until you realize it means the dollar loses half it’s value every 20 years.

    If you want a guaranteed stable currency over a period of a few years, you’re hosed. NOTHING supplies that.

    I don’t.

    Seriously, this is the problem. A “stable currency” means hoarding and deflation, which means a cycle of declining economic growth as people take their money out of the economy waiting for it to appreciate in value.

    Now, I don’t want hyperinflation either. But I do, basically, want the dollar to steadily decline in value over time. Because how much the dollar is worth is a totally irrelevant measure of anything– we can always print more, after all, if the value of each one goes down. But the result of the dollar declining in value over time is that it creates an incentive for people to either spend or invest it, because hiding it in the mattress results in a loss of wealth over time.

    Moderate inflation is a necessity to keep money flowing through the economy. And we empower central banks to give us that moderate inflation while not sending us into an inflationary spiral.

  22. Mr. Esper rightly points out that markets need moderate inflation to keep people from hoarding cash (or gold if that’s the definition of “cash”).

    Others have correctly observed that that the value of money, or anything else, depends on our aggregated opinions about what it’s worth. Cigarettes indeed count as money in prison, since market participants define it that way.

    It also helps that inflation is fairly predictable by market participants, and this depends on linking the value of currency not with commodities but with productivity. Our currency is valuable to others, and inflation remains moderate, because we are productive as a society. People lend us money because they know we are productive enough to pay it back. Economies cannot grow without an associated growth in the money supply, and problems arise when they don’t grow in tandem. A gold standard guarantees, by definition, that the money supply and the economy cannot grow together — or at least that the market cannot ensure that it does.

  23. What I want is my wages to increase faster than inflation, aka increase purchasing power. Which is more likely to deliver that: inflation or deflation? And why? At least some here attempt to answer this difficult question.

  24. “Seriously, this is the problem. A “stable currency” means hoarding and deflation, which means a cycle of declining economic growth as people take their money out of the economy waiting for it to appreciate in value.”

    Seriously, have you ever given any thought to the possibility that, since most economists are paid directly or indirectly by government, much of modern economic doctrine is driven by the need to tell governments that their bad habits are good policy?

  25. Good heavens. Brett has now decided that all of economic theory is a Government Plot.

    Y’know, Brett, these folks write whole bookshelves about their theories, and each others’ theories. You are free to read some of this stuff, and try to figure out where they’re wrong, or where they’re lying to please their masters. Or you could just read the same bloody passage you quoted, and try to contest the argument it makes, instead of accusing its writer of being a dupe who’s been bamboozled by corrupt lackeys of the state.

  26. I guess William Jennings Bryan lives on here at RBC.

    Though I would be only too happy to crucify y’all (figuratively) on a cross of gold, Professor Friedman’s answer to those criticizing the barbarous metal as a standard of value is still the best. Replace the Federal Reserve Board with a computer that increases the money supply by an annual percentage in the realm of annual productivity increases. That would provide the steady money supply expansion needed to provide stability, growth, and even a whiff of inflation for all of you poor creditors out there. The point being of course that this scheme incorporates the most valuable attribute of a gold link – protection against the tendency of governments of all types (including exceptional ones) to inflate their debts away.

  27. Redwave72,

    You can either agree with Friedman’s economic ideas or like the gold standard, but not both, as you seem to be trying to do. Friedman was a strong advocate of floating exchange rates, which a gold standard makes impossible, as he surely understood.

  28. Brett, Red, compassionate advice: The most important thing about digging a hole is knowing when to stop. Seriously dudes, it’s getting embarrassing.

  29. I would love to hear Red’s version of the Professor’s answer, given that he once said:

    “I think those people who say they believe in a gold standard are fundamentally being very anti-libertarian because what they mean by a gold standard is a governmentally fixed price for gold.”

    Never thought of it that way, did ya?

    And let me say that it seems to me that your paranoid fear of government action implies a fundamental lack of faith in free markets, which we need government to define. Since we as a free people influence construction of the market through government, it has agency in the free market and becomes part of it. If you don’t believe that we as a people control that agency — that the US government can act on its own against its citizenry — then you have lost faith in the American Democratic Experiment, and I challenge your allegiance to the flag. And if you believe that the subset of citizens who actually control the government would destroy the economy by inflating government out of debt, then I question your intelligence.

  30. “Replace the Federal Reserve Board with a computer that increases the money supply by an annual percentage in the realm of annual productivity increases.”

    Amusing, but totally misses the point: Gold is the computer. Large stock, annual production only a tiny fraction of the world’s stock each year. And nobody can pass a law reprogramming this particular computer.

    Gold isn’t ideal, a well run fiat money system would indeed be better. People advocate a gold standard because they don’t trust the people running the fiat money system. Because fiat money systems are never well run forever.

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